Deposit-free mortgages are about to return to the housing market – but experts have warned they pose a risk of negative equity and threaten to destabilise the banking system.

Skipton Building Society plans to launch a new loan that would allow borrowers to bypass standard deposit requirements by using their rental payment history. Borrowers typically need to pay a deposit of at least 5pc of the purchase price when taking out a mortgage.

Skipton said its mortgage would “enable people trapped in rental cycles – where they’re prevented from being able to save for a house deposit – to access the property ladder”.

It comes as first-time buyers are increasingly shut out of the housing market by higher mortgage rates and the withdrawal of the Help to Buy scheme, which provided interest-free loans of 20pc – 40pc in London – for five years to help them buy a home with only a 5pc deposit.

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